TaxTMI 
TaxTMI 
TaxTMI 
2015 (3) TMI 643
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....to confirm disallowance of Bad Debts of Rs. 1037344 which has its germane from hotel operations and offered for taxation in earlier years. 3. In this case the AO made disallowance of bad debts of Rs. 10,37,344/- by observing as under:- "It is observed from the Profit & Loss A/c that the assessee has written of bad debits of Rs. 10,37,344/-. However, the assessee failed to furnish any details in support of the claim and hence, the nature of the claim could not be ascertained. Therefore, the claim of bad debts of Rs. 10,37,344/- is being disallowed and added back to the total income." 4. Against the above order, the assessee appealed before the ld.CIT(A). The ld.CIT(A) reproduced the following submissions of the assessee:- "01. The statement to such effect is not appropriate in view of the fact, that full details thereof were furnished during the course of assessment proceedings. Details of Bad Debts was furnished both in assessment proceedings and also in appeal proceeding. Debts which were written off as bad in the previous year relevant to assessment year 2003-04, were offered for taxation in respective assessment years. 01. CBDT in Circular No.551 dated 23.01.19990 as ....
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....offered by it for taxation. He further observed as under:- "For the allowability of a debt as bad it requires to be proved that the amount of that debt was taken into income of the assessee in an earlier year. In the instant case since the assessee did not do so, its claim of bad debts cannot be allowed. For the above discussion the disallowance of Rs. 10,37,344/- made by the AO is confirmed. This ground is, thus, dismissed." 5. Against the above order, the revenue is in appeal before us. 6. We have heard both the ld. Counsel and perused the record. We find that the assessee has debited a sum of Rs. 10,37,344/- as bad debt. The assessee has claimed that it has been written of as bad debt, and as such claim of bad debt written off is allowable. The revenue authorities have not drawn any adverse inference on account of bad debt. We find that once the assessee has written off as bad debt as per law emanating from the Special Bench Decision in the case of Oman International Bank (supra) [ITAT Mumbai Bench, Mumbai] the same is allowable. However, it is also settled that bad debt claimed by the assessee is allowable only if the amount of bad debt was taken into account in the income o....
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.... the assessee in course of assessment proceeding. 3. That on the facts and circumstances of the case and in law, the ld.CIT(A) erred in deleting the disallowance of Rs..23,17,827/- of Management Fees for the assessment year 2003-04. 9. Apropos ground no.1 regarding allowability of deduction u/s. 43B of the Act. In this case the AO has made disallowance of Rs. 54,17,874/- by observing as under:- As per the Profit & Loss a/c the assessee has debited Rs. 76,41,979/- on account of Rates & Taxes. However, as per point 8 of the Notes on account a sum of Rs. 48,65,858/- relates to earlier years. From the details of Rates & Taxes the following is reproduced below- 3.03.2003 Income tax [inadmissible] Rs.12,695/- Luxury Tax 2000-01 Rs. 2,186/- Professional-tax, 2001-02 Rs. 380/- WBST, 1996-96 to 1999-2000 Rs.82,003/- 31.03.2003 Kolkata Municipal Corpn 1994-95, 1995-96, 1996-97 Rs. 13,40,266/- Kolkata Municipal Corpn. 1998-99 Rs.39,80,344/- Rs.54,17,874/- As seen from above, expenses of Rs. 54,17,874/- relates to earlier years. Whereas, payment of income-tax is an inadmissible expenditure, professional tax, luxury, W.B.S.T are p....
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....is ground is, hence, partly allowed." 11. Against the above order, the revenue is in appeal before us. 12. We have heard both the counsel and perused the record. We find that the ld.CIT(A) has allowed the impugned payment on the basis of provisions of section 43B of the I.T Act 1961. The said section mandates that the statutory dues should be allowed if they are paid during the year or subsequently prior to the due date of filing of return irrespective to the year to which they pertain. In this case, the ld. CIT(A) has given a finding that liability of municipal tax though pertaining to earlier year crystallized during the year as necessary bill was raised during the year. This was paid before the due date of filing of return. Hence, the amount involved is allowable as per provisions of section 43B of the Act. It is not the case of the revenue that the concerned payment has not been made before the due date of filing of return. The revenue has taken the ground that the said amount should not be allowed if it was paid in subsequent financial year. We find that this ground is not sustainable as section 43B itself mandates that the amount involved can be allowed if the same is paid ....
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....because the accounts of the assessee are subjected to audit and the auditors have not mentioned any short coming on that account, in assessee's books, in their Audit report. We find that AO's remand report indicates that the bills submitted in this regard were not proper inasmuch as names, addresses or bills of suppliers etc were not mentioned in the vouchers. This finding of the AO cannot be dislodged only by plea that the accounts of the assessee were audited and the auditors have not pointed out any short coming. Income tax laws do not provide that the auditors report should be treated as sacrosanct and the AO need not make proper examination. Hence, assessee's claim of expenditure in absence of proper supporting by way of cogent vouchers cannot be allowed. In such circumstances, we set aside the order of the ld.CIT(A) on this issue and restore that of the AO. 18. Apropos ground no.3 regarding disallowance of Rs. 23,17,827/- of management fees. The assessee had submitted during the assessment proceedings that during the financial year 2002-03 it had entered into an agreement with Sarovar Park Plaza Hotels and Resorts Pvt. Ltd for operating hotel Peerless Inn and a sum of Rs. 23....